Science As Heck

Online Trading: Definition, Meaning and Examples

As the name suggests, online trading is the act of buying and selling (trading) commodities – such as stocks – online.

In the past, it wasn’t very common for “ordinary” people to own stocks. This was most commonly reserved only for the rich and wealthy, as well as people in power. However, things change and nowadays, virtually anyone can own stocks.

Especially considering the fact that everything has shifted online and thus the stock market and the chance to give trading a go became much more easily accessible. In this day and age, anyone who has a computer and enough money to open a trading account can enter the market – with or without a personal broker or opulent wealth.

However, that doesn’t mean that you should simply run into online trading head-first, without any previous knowledge or research. The fact that trading is now more easily accessible doesn’t mean that it’s any easier or any less of a serious business than it used to be. Here, we will explore some of the basics of online trading.

What is online trading?

As the name suggests, online trading is the act of buying and selling (trading) commodities – such as stocks – online. With the evolution of technology, it is now possible to also enter the market by downloading an app on your smartphone. In order to be able to partake in it, you will first be required to open up a trading account. Once you set up the account, you will have to go through the KYC process before you can start placing orders. As soon as you’re cleared, you can start trading online.

Online Trading [Via Shutterstock]
Online Trading [via – Shutterstock]

What are the advantages of online trading?

The first most obvious advantage of online trading is the fact that it’s available 24/7. Unlike traditional trading, when trading online, you simply don’t have to wait for the stock market to open, because the internet is open constantly, which means there is no certain timeframe when you can enter the trade.

Furthermore, online trading gives you far bigger control over your trade. Not only that but since everything in online trading is happening in real time, you can monitor the progress of your trade from start to finish. Finally, your account and your online portfolio will be updated automatically, so there’s no reason to worry about that either.

Advantages of online trading
[via – Shutterstock]

On the other hand, there are also some things that require special attention when it comes to online trading. First and foremost, you need to ensure your online safety. It’s advisable that you always use dual authentication for your trading account. Also, make sure you always log out of your account when you’re not using it to avoid any potential breach of privacy. Aside from that, make sure you install a reliable anti-virus on your computer and avoid remembering the password to your account online.

What are some of the basic trading types?

Online trades are, most commonly, divided into three basic categories – short-term, medium-term and long-term trades. The first usually last only up to a few weeks, the second ones range from a few weeks to even a couple of months, while the third ones can expand over a period of a few years.

Within these categories, there are, of course, different types of trades. Some of them include day trading, position trading, swing trading and online CFD trading. When it comes to day trading, it’s of the utmost importance to stay up to date with all the relevant news from the stock market. That’s why it would be best to follow reliable resources, such as AskBrokers market talk to stay on top of relevant news from the industry. Position trading is one of the long-term strategies where the decision to buy or sell is usually based on the extensive research of the market trends. Swing trading usually focuses on trading assets when their prices “swing”, i.e. buying the asset when the price is low and selling it as soon as the price goes up. CFD trading revolves around buying the right to speculate how the asset will behave on the market, rather than buying the asset itself.

Therefore, when entering the world of online trading, you will first need to determine which trading type and style works for you personally. Aside from that, you also need to ensure a secure connection, either via your computer or your mobile phone, to reduce the chances of losing any sensitive information to the third party. Finally, do your research extensively and always stay up to date with all the latest news to avoid making a costly mistake.

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